If insurance proceeds are received for property used in a trade or business, a casualty transaction can result in recognized gain or recognized loss.

Question

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When insurance proceeds are received for property used in a trade or business, the amount of the proceeds may exceed the adjusted basis of the property. If this occurs, a recognized gain can result. On the other hand, if the insurance proceeds are less than the adjusted basis of the property, a recognized loss can result.

If Insurance Proceeds Are Received for Property Used in a Trade